Contract Closure Process

December 19, 2007 | Author: PM Hut | Filed under: Contract Administration & Close-out, Procurement Management

Contract Closure Process
By Elyse Nielsen

When you have a contract, the Contract Closure process is just common practice. Contract Closure puts the finishing touches on Project Procurement Management. The four inputs to the Contract Closure Process are:

  • The Procurement Management Plan – The Procurement Management Plan is the play book for how to manage the Contract Closure process and to interweave it with other processes.
  • The Contract Management Plan - The Contract Management Plan details how to manage the contract on significant purchases, throughout the life of the contract. A project team commonly refers to the Contract Management Plan for any contract closure guidelines surrounding a purchase. By providing information for the necessary documentation, delivery, and performance requirements, the team can assure the seller has met all obligations necessary for the contract to be closed.
  • Contract Documentation - Contract documentation encompasses the contract, requested changes to the contract, approved changes to the contract, schedules, seller-developed technical documentation, and seller performance reports. Teams review contract documentation to ascertain what was in the contract originally and how that changed overtime. Additionally the team will use contract documentation to determine how the seller is reporting its performance. If the seller has met its agreed to obligations, then the contract can be brought to closure.

The contract closure procedure commonly occurs during the Close Project process. The contract closure procedure drives the process detailing all activities required by project team members, customers, and other stakeholders to settle and close any contract agreement established for the project, as well as define those associated activities supporting the project’s official administrative closure. The contract closure procedure involves product verification and administrative closure. The contract terms and conditions can also appoint specifications for contract closure that must be included in this procedure. In project management, there are two common tools and techniques to close contract.

  • Procurement Audits - A procurement audit consists of a structured analysis of the procurement process from the Plan Purchases and Acquisitions process through Contract Administration. Procurement audits identify successes and failures that project managers should take note of when preparing or administering other procurement contracts for the project or other projects within the performing organization. The audits bring successful practices to light which can be used in the future. Additionally, procurement audits identify any related project failures during procurement processes which can be avoided in upcoming projects. The procurement audit includes examining activities related to requirements definition, tendering, bid evaluation, contract award, contract examination, and contract closure.
  • The Records Management System – The records management system is a set of processes, related control functions, and automation tools that are condensed as part of the project management information system. Project managers use a records management system to manage contract documentation and records. The organized system helps index and store contract documentation, records, and correspondence created during contract closure. It also assists with archiving project procurement documentation associated with contract closure so project managers can retrieve it in the future.

Procurement audits and records management systems are the two tools for the Contract Closure process. Procurement audits are used to identify project successes and failures so that best practice is ensured when contracting. Records management systems are used to manage documentation and records related to contract closure. The system helps with maintaining an index of contract documents and correspondence, and archiving and retrieving that documentation. After you have done the due diligence the out puts of the Contract Closure process are:

  • Closed Contracts - Closed contracts provide formal notification to assure everyone agrees that the deliverables have been successfully achieved and that the contract has been closed. It is the project manager’s responsibility to ensures that each seller receives a formal notification of completion. Closed contracts are also used is to provide documentation in the case of unresolved disputes. Future unresolved claims could arise, related to contract closure and conditions, that are subject to litigation. To be prepared for this possibility, make sure that all closed contracts are filed and kept in order.
  • Organizational Process Assets (Updates) - Updates to organizational process assets are the second output of the Contract Closure process. They consist of a set of documentation that includes the closed contract, the buyer’s official notice of acceptance or rejection of the deliverables, and recommendations from project experience to use in future projects. The project manager puts project documentation in the contract file and stores it for future accessibility. The project manager may need to refer to the contract file later for litigation purposes and to review prices if there are ongoing pricing contracts for provision of products or services. Check with local and state authorities for specific record retention requirements before destroying any documents.

Elyse Nielsen runs Anticlue, a blog covering a variety of health care related topics from both an IT and a Project Manager’s perspective.

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